A P RAHEJA Vs. STATE OF HARYANA

JUDGEMENT

(1.) SHRI Rajiv Raheja -petitioner No. 2 is a former director of M/s. V.P. Engineering Service P. Ltd., Karnal (for brevity, "the company") whereas Shri A.P. Raheja -petitioner No. 1 is his attorney. The respondent Department served notices on petitioner No. 1 being the attorney of petitioner No. 2 to effect the recovery of sales tax amounting to Rs. 90,000, in respect of assessment year 1981 -82 on the ground that petitioner No. 2 had been a director of the company. The notices were duly replied by petitioner No. 1 on November 2, 1987 (petitioners Nos. 3 and 4). He also filed an affidavit stating that petitioner No. 2 is the son of petitioner No. 1 and he is settled in U.K. and he had resigned as a director of the company on November 21, 1983 (petitioner No. 5). It has further been asserted in the petition that the letter of resignation was forwarded to the Registrar of Companies on December 20, 1983, on a prescribed form (petitioner No. 2). The prayer made by the petitioner is that no recovery from a former director of the company could be effected because the company is a separate entity and the assessment has been made against the company and not against an individual director, The basic principle of company law that corporate character of the company continues and the director cannot be made liable is sought to be applied at the instance of the petitioners.

(2.) IN the written statement filed by the respondents the usual objection of 2 non -filing of an appeal under Section 39 of the Haryana General Sales Tax Act, 1973 (for brevity, "the Act") has been raised. It has further been stated that under Section 18 of the Central Sales Tax Act, 1956 (for brevity, "the CST Act"), recovery could be effected from the director as well.

(3.) MR . Suvir Sehgal, learned Counsel for the petitioners has argued that 4 within this jurisdiction itself the principle of law that no recovery of tax could be effected from the director, has been settled by a Division Bench of this court as early as 1964 in the case of Surinder Nath Khosla v. Excise and Taxation Commissioner, [1964] 15 STC 838. According to learned Counsel an incorporated company is a juristic person and a separate identity distinct from any individual shareholder. Therefore, the business carried on by the company belongs to it in its juristic capacity and not to its shareholders. For similar view reliance has also been placed on another judgment of learned single judge in the case of Tikam Chand Jain v. State Government of Haryana : [1987] 67 STC 388 (P & H) : [1987] 92 PLR 151.